Barack Obama Financial Crisis Politics The Opinionsphere

A Typically Wrong-headed Krauthammer Column

[digg-reddit-me]Charles Krauthammer in a typically insightful yet wrong-headed article carries out an intriguing thought experiment:

Five minutes of explanation to James Madison, and he’ll have a pretty good idea what a motorcar is (basically a steamboat on wheels; the internal combustion engine might take a few minutes more). Then try to explain to Madison how the Constitution he fathered allows the president to unilaterally guarantee the repair or replacement of every component of millions of such contraptions sold in the several states, and you will leave him slack-jawed.

I’m somewhat surprised that Krauthammer knows who James Madison is – given his reluctance to acknowledge the Constitution places any limits on executive power in the realm of national security in direct contravention of Madison’s understanding of his Constitution. But I suppose Krauthammer rationalizes that away by explaining that the Constitution is not a “suicide pact” and thus in times of physical danger can be safely stored away – but in an economic emergency, it must constrict the president as much as possible to preserve the status quo. But by exclaiming how shocked Madison would be at power politics, Krauthammer manages to make Madison out to be a naif – rather than the student of human nature and power that he was.

Still, one can rightly imagine Madison questioning how we got here. So, I will answer Madison’s hypothetical question, namely – “How is it that the limited government he constructed in his Constitution can allow the president to unilaterally guarantee the repair or replacement of every component of millions of such contraptions sold in the several states?”

Because, Mr. Madison, in 1929, with a small percentage of Americans gaining control of a large chunk of the nation’s economy, the market broke down and the government was forced to assume some partial responsibility for the well-being of it’s its citizens and to curb the excesses of the markets.

Then, in 1980, the government began reducing it’s its responsibility for the well-being of its citizens and removing the safeguards put in place to prevent another disasterous market breakdown. This led to another thoroughly undemocratic concentation of power – which the public accepted in return for the assurance that their standard of living would constantly improve. And so it was under Ronald Reagan that the government became responsible for assuring constant economic growth that would benefit all classes of society, at least a bit.

And now, that arrangement has come to a screeching halt. 

Obama is proposing a new social bargain – a fact which Krauthammer recognizes. But Krauthammer sees this bargain in terms that were relevant in the 1980s – as a resurgence of the Great Society liberalism he grew to hate. But instead, Obama proposes a new market-state liberalism – in which the government accepts a responsibility to referee and more actively maintain the markets and to provide investments that are too capital-intensive and long term for corporations with their limited time horizons to finance. Obama also believes it is the government’s role to reduce the disruption and instability that the creative destruction of capitalism wreaks. The end goal is to create a more level playing field and mainly through soft government pressure prevent destabilizing concentrations of power.

Krauthammer though only sees Lyndon Johnson reborn intent on “leveling” society and reducing the inequities between the rich and the rest of us. Krauthammer explains that for Obama the “ultimate social value is fairness” – and Krauthammer means this as a bad thing. The subtlety that Krauthammer sidesteps is that Obama is in favor of fair processes rather than enforcing some pre-determined fair ends. This was the traditional position of the conservative – but it is position that conservatives have long since abdicated. Presumably when he criticizes fairness, Krauthammer believes that markets should strive for efficiency rather than fairness – but he neglects to make any case that our current market structure is efficient. 

Michael Osinski described in New York magazine the logic of how money is awarded on Wall Street:

I was very good at programming a computer. And that computer, with my software, touched billions of dollars of the firm’s money. Every week. That justified it. When you’re close to the money, you get the first cut. Oyster farmers eat lots of oysters, don’t they?

This describes neither a fair nor an efficient way of distributing resources. What “conservatives” such as Krauthammer do not realize is that capitalism, like democracy, is merely the least-worst system of managing the market – and that just as democracy’s excesses must be managed, so must capitalism’s. Krauthammer does not seem to accept that the structure of governance is changing with globalization – as the nations of the world are evolving into market-states. It was the beginning of this shift that led to Ronald Reagan’s and Margaret Thatcher’s success. Although some conservatives saw these successes as a return to a pre-Great Society or a pre-New Deal America, they represented instead a shift forward, an evolution from nation to market-state. Liberals lost elections because their solutions no longer spoke to this evolved America – and they could not see the sand shifting beneath themselves. They were stuck in the past.

But now – as Niall Ferguson has admitted – it is only the liberals who are providing a coherent answer to the challenges we face.

Krauthammer – like far too many conservatives today – is stuck pretending we face the challenges of the 1980s all over again. Until conservatives like him notice the sand shifting beneath them, they will have little to offer. As a well-functioning democracy requires at least two functioning political parties, I hope they get their heads our of the sand sooner rather than later.